Asset pricing and systematic liquidity risk: an empirical investigation of the Spanish stock market
AbstractSystematic liquidity shocks should affect the optimal behavior of agents in financial markets. Indeed, fluctuations in various measures of liquidity are significantly correlated across common stocks. Accordingly, this paper empirically analyzes whether Spanish average returns vary cross-sectionally with betas estimated relative to two competing liquidity risk factors. The first one, proposed by Pastor and Stambaugh (2002), is associated with the strength of volume-related return reversals. Our marketwide liquidity factor is defined as the difference between returns highly sensitive to changes in the relative bid-ask spread and returns with low sensitivities to those changes. Our empirical results show that neither of these proxies for systematic liquidity risk seems to be priced in the Spanish stock market. Further international evidence is deserved.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of the Basque Country - Department of Foundations of Economic Analysis II in its series DFAEII Working Papers with number 2002-05.
Date of creation: Sep 2003
Date of revision:
Postal: Dpto. de Fundamentos del Análisis Económico II, = Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
Other versions of this item:
- Miguel A. Martínez & Belén Nieto & Gonzalo Rubio & Mikel Tapia, 2002. "Asset Pricing And Systematic Liquidity Risk: An Empirical Investigation Of The Spanish Stock Market," Business Economics Working Papers wb026022, Universidad Carlos III, Departamento de Economía de la Empresa.
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hanno Lustig & Yi-Li Chien, 2005.
"The Market Price of Aggregate Risk and the Wealth Distribution,"
NBER Working Papers
11132, National Bureau of Economic Research, Inc.
- YiLi Chien & Hanno Lustig, 2010. "The Market Price of Aggregate Risk and the Wealth Distribution," Review of Financial Studies, Society for Financial Studies, vol. 23(4), pages 1596-1650, April.
- Hanno Lustig, 2001. "The Market Price of Aggregate Risk and the Wealth Distribution," Finance 0111004, EconWPA, revised 16 Nov 2001.
- Hanno Lustig, 2004. "The Market Price of Aggregate Risk and the Wealth Distribution," UCLA Economics Online Papers 299, UCLA Department of Economics.
- John Y. Campbell, 2000.
"Asset Pricing at the Millennium,"
Journal of Finance,
American Finance Association, vol. 55(4), pages 1515-1567, 08.
- John Y. Campbell, 2000. "Asset Pricing at the Millennium," Harvard Institute of Economic Research Working Papers 1897, Harvard - Institute of Economic Research.
- John Y. Campbell, 2000. "Asset Pricing at the Millennium," NBER Working Papers 7589, National Bureau of Economic Research, Inc.
- Campbell, John, 2000. "Asset Pricing at the Millennium," Scholarly Articles 3294737, Harvard University Department of Economics.
- Pastor, Lubos & Stambaugh, Robert F., 2003.
"Liquidity Risk and Expected Stock Returns,"
Journal of Political Economy,
University of Chicago Press, vol. 111(3), pages 642-685, June.
- Pástor, Luboš & Stambaugh, Robert F, 2002. "Liquidity Risk and Expected Stock Returns," CEPR Discussion Papers 3494, C.E.P.R. Discussion Papers.
- Lubos Pastor & Robert F. Stambaugh, 2001. "Liquidity Risk and Expected Stock Returns," NBER Working Papers 8462, National Bureau of Economic Research, Inc.
- Luboš Pástor & Robert F. Stambaugh, . "Liquidity Risk and Expected Stock Returns," CRSP working papers 531, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Wang, Jiang & Grossman, Sanford & Campbell, John, 1993.
"Trading Volume and Serial Correlation in Stock Returns,"
3128710, Harvard University Department of Economics.
- Campbell, John Y & Grossman, Sanford J & Wang, Jiang, 1993. "Trading Volume and Serial Correlation in Stock Returns," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 905-39, November.
- John Y. Campbell & Sanford J. Grossman & Jiang Wang, 1992. "Trading Volume and Serial Correlation in Stock Returns," NBER Working Papers 4193, National Bureau of Economic Research, Inc.
- Olivier Renault & Jan Ericsson, 2000.
"Liquidity and Credit Risk,"
FMG Discussion Papers
dp362, Financial Markets Group.
- Belén Nieto, 2002. "La valoración intertemporal de activos: un análisis empírico para el mercado español de valores," Investigaciones Economicas, Fundación SEPI, vol. 26(3), pages 497-524, September.
- Chordia, Tarun & Roll, Richard & Subrahmanyam, Avanidhar, 2000. "Commonality in liquidity," Journal of Financial Economics, Elsevier, vol. 56(1), pages 3-28, April.
- George M. Constantinides, 2002.
"Rational Asset Prices,"
NBER Working Papers
8826, National Bureau of Economic Research, Inc.
- Viral V. Acharya & Lasse Heje Pedersen, 2004.
"Asset Pricing with Liquidity Risk,"
NBER Working Papers
10814, National Bureau of Economic Research, Inc.
- Amihud, Yakov & Mendelson, Haim, 1986. "Asset pricing and the bid-ask spread," Journal of Financial Economics, Elsevier, vol. 17(2), pages 223-249, December.
- Bengt Holmstrom & Jean Tirole, 1998.
"LAPM: A Liquidity Based Asset Pricing Model,"
98-8, Massachusetts Institute of Technology (MIT), Department of Economics.
- Brennan, Michael J. & Subrahmanyam, Avanidhar, 1996. "Market microstructure and asset pricing: On the compensation for illiquidity in stock returns," Journal of Financial Economics, Elsevier, vol. 41(3), pages 441-464, July.
- David Easley & Soeren Hvidkjaer & Maureen O'Hara, 2002. "Is Information Risk a Determinant of Asset Returns?," Journal of Finance, American Finance Association, vol. 57(5), pages 2185-2221, October.
- Chordia, Tarun & Roll, Richard & Subrahmanyam, Avanidhar, 2000.
"Order Imbalance, Liquidity, and Market Returns,"
University of California at Los Angeles, Anderson Graduate School of Management
qt7gh9t9w3, Anderson Graduate School of Management, UCLA.
- Hasbrouck, Joel & Seppi, Duane J., 2001. "Common factors in prices, order flows, and liquidity," Journal of Financial Economics, Elsevier, vol. 59(3), pages 383-411, March.
- Wang, Jinan & Chen, Langnan, 2012. "Liquidity-adjusted conditional capital asset pricing model," Economic Modelling, Elsevier, vol. 29(2), pages 361-368.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alcira Macías Redondo).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.